Even after the Treasury Department and Internal Revenue Service extended the deadline for filing tax returns for the 2020 tax year by over a month, the IRS found itself faced with a substantial backlog of unprocessed tax returns right up to the May 17 deadline. The delay in processing 2020 tax returns has also resulted in a delay in the issuing of refunds, including for those people expecting a refund for taxes paid on unemployment benefits they received in 2020, and has been the result of a number of added strains placed on the IRS this tax season.
Over the course of the COVID-19 pandemic, the IRS has had to take on the added responsibility of sending out over $800 billion worth of stimulus payments over the course of three separate rounds of payments. The IRS has as a whole done a very commendable job of distributing the more than 472 million payments it has sent out thus far, getting the payments sent out quickly and with minimal errors.
The added responsibility of sending out these payments, however, has likely helped to slow down the overall rate at which the IRS can process tax returns. The most recent batches of third round stimulus payments of up to $1,400 have themselves been tied directly to tax returns, with the IRS now focused on getting payments sent to those people whose eligibility for either an initial payment or a supplemental “plus-up” payment is dependent on their 2020 returns.
In addition, this year’s taxes themselves have required that the IRS take more time processing some returns. While the IRS typically sends out refunds in less than 21 days, the agency has acknowledged that those people who are looking to take advantage of some benefits included in the American Rescue Plan will likely see their returns take longer to process.
The IRS has also been dealing with staffing shortages and problems with its resources and equipment, with equipment such as printers and copiers either broken or out of ink. This has complicated the agency’s ability to function efficiently, and has even limited its ability to train new hires to make up for its staffing problems because it cannot print enough training manuals.
Some of the IRS’ problems date back to last year, when the agency had to temporarily shut down its tax processing centers because of the pandemic. Even when these centers reopened, they did so with only a limited capacity because of the need to maintain social distancing practices. As a result, the IRS found itself behind in the processing of 2019 tax returns, even as it was faced with the need to distribute stimulus payments and begin processing 2020 returns.
The Biden administration has proposed increased funding for the IRS in an effort to alleviate some of the agency’s staffing problems.
Eli Fuhrman is a contributing writer for The National Interest.